Jun 9, 2016- The World Bank (WB) has projected Nepal’s economy growth at 4.7 percent for fiscal year 2016-17, which is 1.8 percentage points less than the government projection and 1.1 points less that the aid agency’s own forecast in January.
The WB reduced its forecast for the global economy on Wednesday, the second time this year, bringing it down to 2.4 percent from the 2.9 percent estimated in January.
Stubbornly low commodity prices, sluggish demand in advanced economies, weak trade and diminishing capital flows have been attributed for reduction in 2016 global economic growth.
In January, the WB forecast for Nepal’s economic growth stood at 5.8 percent. The WB downgraded the projection due to political risk and under-execution of projects with public investment.
“Political risks are high in Nepal along with Afghanistan, Burundi, Democratic Republic of Congo and Haiti,” said the aid agency, citing protests by Madhes-based political parties after the promulgation of new constitution.
Nepal’s growth projection is the second lowest in South Asia compared to Bangladesh, Bhutan, India and Pakistan, according the World Bank.
Despite the WB projection of 5.8 percent in January, the government in its budget tabled on May 28 had projected economic growth for 2016-17 at 6.5 percent, which economists had termed too ambitious.
Jagadish Chandra Pokharel, former vice-chairman of the National Planning Commission, said that even in normal conditions, 6.5 percent growth is too mammoth a task to achieve. “If government’s capital expenditure remains over 80 percent, the country witnesses a normal monsoon and reconstruction activities pick up pace, then we can expect growth up to, maybe, 5.5 percent next fiscal,” he said. However, failure to spend development budget has been a perennial problem in the country and the situation aggravated this year due to the quakes and Indian blockade for more than four and a half months.
Pokharel, however, said he is expecting relatively higher growth next fiscal year, arguing that current fiscal year remained extraordinary and situation of this year could not be made the basis for next year’s growth projection.
Former NPC member Posh Raj Pandey said that the WB’s growth projection could be achieved in the context of normal monsoon, but the government’s target is highly ambitious. “The government has not identified the growth driver,” he said.
The new budget says that the allocation of significant amount of budget in reconstruction, agriculture, physical infrastructure, energy and the social sector would inspire high economic growth and sustainable development.
However, Pandey said investment in the infrastructure sector would take some years to yield economic results and the payment labourers will get for working in these projects would not have big synergy impact on the economy.
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